Western Union Intern., Inc. v. F. C. C., 6

• Decision Date: 20 October 1976
• Docket Number: No. 6,D,6
• Citation: 544 F.2d 87
• Parties: WESTERN UNION INTERNATIONAL, INC., Petitioner, v. The FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents, The Western Union Telegraph Company et al., Intervenors. ocket 75-4132.
• Court: U.S. Court of Appeals — Second Circuit

Page 87

544 F.2d 87

WESTERN UNION INTERNATIONAL, INC., Petitioner, v. The FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents The Western Union Telegraph Company et al., Intervenors.

No. 6, Docket 75-4132.

United States Court of Appeals Second Circuit.

Argued Sept. 13, 1976.

Decided Oct. 20, 1976.

Alvin K. Hellerstein, New York City (Stroock & Stroock & Lavan, Henry J. Silberberg, Alan Kolod, Robert E. Conn, and Roger P. Newell, New York City, on the brief), for petitioner.

Joseph A. Marino, Washington, D. C. (Ashton R. Hardy, Gen. Counsel, Daniel M. Armstrong, Associate Gen. Counsel, and Lawrence S. Schaffner, Counsel, F. C. C., Washington, D. C., Thomas E. Kaufer, Asst. Atty. Gen., Carl D. Lawson, and Lee I. Weintraub, Dept. of Justice, Washington, D. C., on the brief), for respondents.

Charles P. Sifton, New York City (LeBoeuf, Lamb, Leiby & MacRae, John S. Kinzey, Howard A. White, and John A. Ligon, New York City, on the brief), for intervenor ITT World Communications, Inc.

Rosel H. Hyde, Herbert E. Marks, Michael B. Green, Wilkinson, Cragun & Barker, Washington, D. C., on the brief for intervenor State of Hawaii.

Milton Black, New York City (Mudge, Rose, Guthrie & Alexander, New York City, Donald J. Zoeller, Joseph H. Stallings, Jack Werner, New York City, and Joel Yohalem, Washington, D. C., on the brief), for intervenor The Western Union Telegraph Co.

Before ANDERSON, MANSFIELD and MULLIGAN, Circuit Judges.

ROBERT P. ANDERSON, Circuit Judge:

This is a petition for review of a memorandum opinion and order of The Federal Communications Commission (FCC) in the matter of The Western Union Telegraph Co., 55 F.C.C.2d 668 (1975). The FCC decided that Western Union Telegraph Co. (WU) might apply for authority, pursuant to 47 U.S.C. § 214 (1970), to lease and operate facilities between the 48 contiguous United States and the District of Columbia, and the State of Hawaii for the purpose of extending WU's mailgram service to Hawaii. For the reasons set out below, the FCC's order is set aside.

A mailgram, in the words of the FCC opinion, is essentially "electronic mail." The message is picked up from a customer by various means, including telephone, telex, over-the-counter and messenger. The mailgram is then transmitted over WU circuits to its computer switching center in Middletown, Virginia. There the computer routes the mailgram over circuits specifically dedicated to this particular service, to a preselected Post Office, where a postal employee takes the message from the teleprinter and puts it in the regular mails.

Mailgram service within the continental United States began on January 1, 1970 for an experimental, two-year period, United Telegraph Workers, AFL-CIO v. FCC, 141 U.S.App.D.C. 190, 436 F.2d 920, 921 (1970). At the time of the FCC order in this case, there were pending before it applications for authority to provide a service similar to mailgrams filed by RCA, ITT, WUI (totally separate company from WU), the Hawaiian Telephone Co. in connection with WU and The Domestic Satellite Corp.

The contemporary American telegraph industry is made up of domestic and international "record carriers." WU is the sole domestic carrier of telegrams, while international record carriers (IRCS), which include Petitioner WUI and intervenor ITT World Communications, Inc. (ITT), traffic only in messages between the continental United States and abroad. For the purposes of accepting and delivering international telegraph messages, IRCS may maintain public offices, pursuant to 47 U.S.C. § 222(a)(5), in certain FCC-designated cities of the United States known as "gateway" cities. Messages for delivery abroad which originate within the United States in other than gateway cities will generally be placed with a local WU office in the "hinterland." From there, the message will travel by WU lines to an office of an IRC and thereafter to its final destination abroad. WU distributes messages placed with it for foreign delivery with competing international carriers by use of a formula derived pursuant to 47 U.S.C. § 222(e)(1).

This peculiar industry structure came about primarily through the enactment, in 1943, of 47 U.S.C. § 222, which deals with the permissive consolidations and mergers of telegraph carriers. WU came within the provisions of this statute as a result of its 1943 merger with the failing Postal Telegraph Co., Western Union Divestment, 30 F.C.C. 323, 325 (1961). Section 222(b)(1) allows the merger or consolidation of any two or more domestic telegraph carriers, but § 222(c)(2) goes on to provide in pertinent part:

"(2) Any proposed consolidation or merger of domestic telegraph carriers shall provide for the divestment of the international telegraph operations theretofore carried on by any party to the consolidation or merger, within a reasonable time to be fixed by the Commission . . . ." (Emphasis added.)

International telegraph operations are defined by the statute as "record communications by wire or radio" originating or terminating at points outside the "continental United States." 47 U.S.C. § 222(a)(6). By a 1960 amendment to 47 U.S.C. § 222(a)(10), Congress defined the continental United States as the States of the Union and the District of Columbia, but, for this purpose, excluded Hawaii. See 2 U.S.Code Cong. & Admin.News, pp. 2963, 2979-80 (1960). Telegraph traffic with Hawaii was thus classified as an international operation open only to IRCS.

Given this background, the Common Carrier Bureau, in an April 19, 1972 decision by its Chief, initially disallowed WU's application to provide mailgram service to Hawaii. The Bureau's decision was grounded on its interpretation of the legislative history of § 222, which led it to conclude that Congress' intent in enacting "the divestment requirement set out in Section 222(a)(2) (sic) . . . (was) to preclude WUTC from engaging in future 'international telegraph operations' as that term is defined in Section 222." The Bureau thus rejected an argument, posited by WU, and renewed by it before this court, that when Congress provided in § 222(c)(2) that a merged domestic telegraph carrier was to divest itself of international telegraph operations "theretofore carried on," it was intended only that WU divest itself of international services and operations in existence as of 1943, the effective date of the statute and of the WU-Postal Telegraph merger. It further argued that, because mailgrams were not in existence in 1943 and could, therefore, be called a "new" service, different from the traditional telegraph operations carried on in 1943, § 222(c)(2) did not apply to the present case. In addition to the legislative history, the Bureau relied on the FCC's decision in Telegraph Service with Hawaii, 28 F.C.C. 599 (1960), discussed infra.

The FCC's reversal of the Common Carrier Bureau's decision entailed a finding that Congress' concern in 1943 was simply "to remedy the problems which were (then) facing the troubled telegraph industry . . .," The Western Union Telegraph Co., supra, 55 F.C.C.2d at 672, so that it could find

". . . nothing in the statute or its legislative history which mandates a broad interpretation of the divestment clause such as to disqualify WU from providing the proposed Mailgram service to Hawaii." Id. at 671.

The FCC first argued for a reading of the divestiture section, § 222(c)(2), consistent with other sections of the Communications Act, setting down only "broad legislative goals" and allowing the FCC broad and flexible powers to achieve those goals "in the light of changing circumstances." Secondly, the FCC found in an appendix to its opinion that the "theretofore" language of the divestiture requirement "should be interpreted to apply only to the types of operations engaged in by WU at the time of the merger in 1943." Id. at 677. Accordingly, the FCC held that it had the authority to allow WU to re-enter international operations for the first time since divestment of the company's international facilities in 1963, because mailgrams were a new service distinct from those offered in 1943.

The FCC is correct in presenting for decision here, only the "narrow legal question" of whether § 222(c)(2) constitutes a ban on the potential re-entry of WU into international operations through the company's application for mailgram service to Hawaii. A review of the FCC's legal conclusions and the rationale leading up to them, FCC v. RCA Communications, Inc., 346 U.S. 86, 91, 73 S.Ct. 998, 97 L.Ed. 1470 (1953), disclose that the Commission erred in deciding the issue as it did.

In determining the meaning of § 222, it is necessary to give careful consideration to its legislative history. Train v. Colorado Public Interest Group, 426 U.S. 1, 96 S.Ct. 1938, 1942, 48 L.Ed.2d 434 (1976); Lynch v. Overholser, 369 U.S. 705, 710, 82 S.Ct. 1063, 8 L.Ed.2d 211 (1962); Federal Maritime Commission v. DeSmedt, 366 F.2d 464, 469 (2 Cir. 1966), cert. denied, 385 U.S. 974, 87 S.Ct. 513, 17 L.Ed.2d 437 (1966). The origins of § 222 lie primarily in the economic difficulties facing the American telegraph industry during the depression of the 1930's. Most affected of the large domestic telegraph carriers was Postal Telegraph Co., which borrowed heavily from The Reconstruction Finance Corporation but, in spite of this aid, continued on the verge of financial collapse. Under these circumstances Congress, in 1939, launched a study of the telegraph industry with the passage of Senate Resolution 95. That study, reported as S.Rep. No. 769 (Study of the Telegraph Industry ), 77th Cong., 1st Sess. (1941), resulted in the recommendation that Congress allow domestic American telegraph carriers to merge, but with a proviso that ". . . there should be no merger between or common control of domestic and international communications carriers but permitting a merger of domestic carriers into one entity and international carriers into a second...